The European maritime industry is at the risk of losing ground to other globally leading shipping centres, according to the EU Shipping Competitiveness Study, commissioned by ECSA and produced by Deloitte consultancy. Deloitte finds that, while in general the EU has developed a competitive framework for shipping with a number of important core elements that should be retained, some specific policies are less competitive compared to other leading international shipping centres.
In this report, Deloitte has devised a set of policy recommendations on how to improve Europe as a location for shipping activities – which would result in a benefit for the whole maritime cluster, on the basis of a benchmark study of five specific international shipping centres (Singapore, Hong Kong, Dubai, Shanghai and Vancouver) and a comparison of the successful policies in those centres with EU policies.
Recommendations
- Formulate a comprehensive and globally oriented shipping and maritime policy in the EU
There is a need for formulating a renewed, overall comprehensive policy for shipping with two significant features. Firstly, it should have a strong focus on supporting the global competiveness of the shipping and wider maritime sector. While emphasising the inherent global nature of shipping, the current maritime transport strategy and the majority of the initiatives launched to a large extent focus on the competitiveness of waterborne transport internal to the EU and other provisions related to safety and security. But both markets (short sea shipping and global shipping) are important to Europe. In fact, the largest share of EU shipping is international and crosstrading, carrying cargoes between third countries. This means that it earns its living outside the EU, doing business with trading partners outside the EU. The global challenge to EU shipping requires the EU to formulate a more globally oriented policy.
Secondly, the policy should be comprehensive by cutting across policy fields like transport, taxation, environment, etc, and thereby cover the key competitiveness factors.
- Improve legal clarity around the application of the SAGs
The uncertainty pertaining to how the SAGs are interpreted in specific cases gives rise to some degree of risk. This risk is related to questions on how different components of a shipping operation should be treated for tonnage tax purposes, and what types of income are accepted as arising from qualifying activities. This is highlighted by the lack of clarity surrounding the European Commission’s gradual shift from the targeting of maritime transport to the inclusion of maritime services, the treatment of ancillary activities, chartering ratios and the treatment of financial income. Whereas this shift is welcome, seen from a competitiveness perspective there is still uncertainty about the degree of flexibility that member states are allowed under the SAGs.
While the maritime SAGs should remain soft regulation, there is an apparent need for continued flexibility in the member states’ application of the guidelines. A one-size-fits-all model that drives out the particularities of individual member state shipping sectors would be harmful to the overall competitiveness of EU shipping.
- Assess and ease the flag link eligibility criteria for entering the tonnage tax regime
The current requirement of a flag link in the tonnage tax regime is restricting the operational freedom of shipowners and operators in the EU, even though the SAGs contain a pragmatic degree of flexibility regarding the use of EU flags. While sometimes a shipowner has little choice in which flag the vessel has to fly, in general, this choice is determined by the overall standards and professionalism practiced by the flag administration as well as by the costs and bureaucracy connected with the flag. EU flags might not always provide the most attractive commercial framework for shipowners, and requirements could lead to increased operating costs or lack of market access. Too rigid an insistence on the location of the flag may be counterproductive in discouraging the use of EU flags. The consequence may be that over time, the EU registers will lose further ground to the growth centres contrary to the stated EU objective.
The recommendation is to consider easing, or as a minimum not further restricting, the current flag link requirements set up in the SAGs. Instead, the
EU should maintain and focus on its requirement concerning strategic and commercial management activities, which is closer to the requirements in other jurisdictions, including Singapore and Dubai.
- Avoid deviating from or going beyond IMO/ILO conventions in EU and member state regulation
There is a continued pressure for higher safety and environmental standards in the EU. Whereas such efforts are also principally positive from a
competitiveness perspective, it is equally important that the EU does not act as first movers and impose stricter regional regulations for international shipping. Implementation of regulations outside IMO/ILO will increase the operating costs relative to flag states, such as Singapore, pursuing regular implementation of IMO/ILO conventions and should be avoided.
Explore more by reading the full report: